Topline
Stocks surged Tuesday morning before settling into modest gains, with Berkshire Hathaway’s latest investments leading the rally, after another promising inflation report stoked hope the Federal Reserve will soon pivot away from its most aggressive monetary policy in decades.
Berkshire Hathaway’s latest stock picks were hot Tuesday.
Key Facts
The S&P 500 jumped 0.9%, the tech-heavy Nasdaq rose 1.5% and the Dow Jones Industrial Average climbed 0.2%.
The latest gain follows the reading of October’s producer price index, which beat economist estimates by rising only 0.2% last month, indicating the Fed’s battle to wrangle in inflation may soon slow with improving inflation data, with LPL Financial’s chief economist Jeffrey Roach projecting the Fed will only raise interest rates by 0.50% next month and soon slow hikes to 0.25%, a significant moderation after four consecutive 0.75% rate increases.
All three major indexes are up 2% or more over the last week thanks to increasing signs of slowing inflation, with the Dow having its best day in over two years Thursday following the latest consumer price index reading, the other most closely-watched metric tracking inflation.
Taiwan Semiconductor rose 10.5% after Warren Buffett’s firm disclosed a $4.1 billion stake in the chipmaker.
Berkshire Hathaway’s other newly revealed investments Louisiana-Pacific and Jefferies Financial Group gained 7.8% and 0.3%, respectively, and Paramount surged 5.1% after Buffett revealed a larger stake in the media giant.
Shares of New York-listed Chinese firms were also among the biggest risers as Beijing-Washington ties appear to improve following President Joe Biden’s first in-person meeting with Chinese President Xi Jinping during his term, with Alibaba, Tencent and Pinduoduo each rising at least 9%.
Contra
Despite the recent optimism in the market, it’s far too soon to declare the war against inflation over, says Comerica Bank’s chief economist Bill Adams. “Chair Powell feels burned after seeing inflation slow temporarily in 2021 only to flare up again in 2022, and he doesn’t want to make the same mistake twice,” Adams wrote “The Fed will wait until they are quite confident that inflation is cooling before taking their foot off of the brake.” Large investors are similarly hesitant to cast too bright an outlook, with a Bank of America survey of major fund managers released prior to Tuesday’s stock rally revealing a lingering sense of uneasiness among large investors, with a two-year high 77% of respondents predicting the U.S. will enter a recession next year.
Surprising Fact
Netflix shares surged 3.7% to $310.20, for its highest close in seven months. The streaming giant’s rebound comes after Bank of America analysts upgraded its rating of Netflix with a $370 price target, indicating about 20% upside even after Tuesday’s jump, citing the company’s strong path for subscriber growth and advertising revenue.
Further Reading
Recession Fears Hit New High Even As Inflation Slows—Here’s What Fund Managers Predict For 2023 (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2022/11/15/stocks-rally-following-strong-inflation-report-buffett-bets-4-billion-on-chipmakers/